ASUNCION, Dec 31: Paraguay closed the year with inflation of 9.9 per cent, well above a 7.5 per cent target agreed with the International Monetary Fund and the highest figure since 2002, the president said on Saturday.

“This was due to external factors, such as the sharp rise in crude oil which had a large impact on the economy. And another element was the increase in beef prices due to exports,” President Nicanor Duarte Frutos told local radio, referring to expanding beef exports fuelled by demand abroad.

The Central Bank has said fruit and vegetable price rises also contributed to inflation. But consumer prices overall retreated in December by 0.6 per cent.

“Although annual inflation is above the target, this rate represents a change in the tendency of price increases in the previous three months,” the president told radio station Primero de Marzo.

Paraguay’s inflation in 2004 was the lowest in 35 years at 2.8 per cent, due mainly to the stability of Paraguay’s currency against the dollar. Inflation reached 9.3 per cent in 2003.

The Central Bank is due to release its official 2005 inflation figures on Monday.

Duarte Frutos also said the government will try to reign in the spending contemplated in the 2006 budget, to which Congress added $120 million during the approval process.

“We are going to work to see how we can manage those expenses that can be postponed so that we do not have at the end of 2006 a fiscal deficit that could harm the country,” Duarte Frutos said.—Reuters